All this Occupy Wall Street business has me brainstorming for innovative economic alternatives, specifically how to make goods and service more available to those with lower numbers in their paychecks. What about charging a percentage of income rather than a set price? Granted, most people would balk at revealing their income for a cup of coffee, but for sake of argument let’s say I had a unique service everyone wanted. (worlds only teleporter, instant orgasms, whatever…) Could I sell it for 1% of a given customer’s annual income? Obviously a bare minimum price would have to exist to avoid freebies for the unemployed. That aside, is this kind of system legal? Has it ever been tried? Does it have a name? Most importantly … could it work?
The general principle involved here is that the government, as a general rule, does not want to break up contracts freely entered into between consenting and competent adults. This is overridden when laws are broken (such as contracting for hitmen and such like), and note the words ‘consenting and competent’, but it goes whenever there is no law someone can point to that says what you’re doing is illegal.
So the big issue I can see right now is how you’re going to do it without going broke suing everyone you think has ripped you off by under-reporting their income. I mean, the IRS freely admits that it can only catch a fraction of the total tax cheats in this country, and it has a lot more resources to go after them.
Well, one rather important determinant of the price of things is the cost of them to the seller. On your system a seller could be forced to sell to sell to some people at below cost price. On the other hand, he could also be forced to offer his goods to wealthier people at a huge markup which might deter them from buying, and might be rewarding the seller disproportionately to his costs and effort expended.
This would also have to be government enforced, presumably, which seems like it would likely involve enormous inroads on people’s freedom (and privacy).
I do not see the point of this when the egalitarian results you seem to desire can be achieved much more easily and effectively, and less intrusively, by progressive taxation, together (if necessary) with tax credits and/or welfare payments, a system that already works well in many countries - even, on a modest scale, in the United States - and for which the necessary bureaucratic infrastructure is already in place.
People who hate taxes and welfare, and see them as stifling for businesses, are going to hate your system even more.
A friend of mine lived in a HUD apartment twenty odd years ago. They took a flat 25% of income. Didn’t matter if you got $250 in SSI (welfare checks) or $375 from a hourly job somewhere. They wanted 25% or market value for the apartment. I think then the market value was probably around $350 a month.
Not sure about today. But I bet it’s probably about the same at HUD apartments.
They told me at my mortgage company that my expected payment & and any outstanding debt payments could not exceed 28% of my proven/verified income. They preferred a little less like 25%. So, I had to go find a house that I could buy with the money they’d lend me. Had to walk away from one that I really wanted because it was a few thousand over my mortgage limit and the seller wouldn’t go down.
A less formal implementation of this is called “charging on a sliding scale” everywhere I’ve seen it, and it’s perfectly legal. Anyone can agree to change anyone else anything for a good or service for a wide variety of reasons and have it all be legal (the only exceptions I can think of are “black people pay 10x as much” and the like).
Of course, if the good you’re selling this way is capable of being resold later, any large-scale implementation of this is going to be met with enterprising low-income people who’ll buy your good at a low price, and then undercut your price by reselling to the high-income people. Under those conditions, arbitrage opportunities force a single price, but that’s a practical matter, not a legal one.
I think that’s highly questionable. How are you going to determine income (i.e., what counts, what doesn’t)? How are you going to verify it? What good would it do to even achieve this for the handful of items where it might work, when it’s clear that it’s quite infeasible for the great majority of stuff that people spend money on?
Bingo. If you’re selling, say, pants, on a sliding scale (e.g. minimum price $20, otherwise .2% of income (so someone making $100,000 pays $200)), then some enterprising poor people are going to snarf up pants @ $20 ea. and offer them to rich people. “Hey, to buy these pants would normally cost you hundreds or even thousands. I can let you have them for $70, and they’re good as new, right from the store.”
If you’re selling personal services (e.g. doctor visits, transportation services), it becomes a lot more difficult. Can I buy a root canal and sell it to a rich guy?
It’s certainly legal. But for most goods it’s completely unworkable, for a number of reasons:
How would you prove what someone’s salary is in a shop? Get them to carry around a recent payslip? Do you refuse to serve them if they don’t have one? If someone has no income do they get it for free?
It really pisses off customers. A lot of websites have started charging different prices for customers depending on the information they can access about them from cookies, Facebook, eBay, etc. If someone’s online pattern seems like they’re well off, the site charges more. Customers despise it and when they find out there tends to be a backlash against the website.
If you’re rich, you’d clearly start getting other people to buy things for you. Send your non-employed wife in to buy the car and you’ll get it free! And on the other side of the coin, poor people could buy Ferraris in bulk and sell them at a huge markup.
It makes it very difficult for shop owners to plan their revenues and costs. The owner’s stock has a set price, but he’d have no idea how much he’s going to get for it when it’s sold because the price is hugely variable.
Most everyday goods are worth tiny percentages of income. The price tag would say “This item costs 0.03% of your weekly income”. Would you really keep shopping there once you see that price tag?
I can think of some doctors in my country that offer consultations based on a very rough approximation of charging percentage of income, by allowing people to self select. They have a couple of hours set aside in their day for free or low-priced consultation for those who can’t afford the regular consultation fee. If you can put up with the increased waiting times and the less thorough examination, it’s assumed you don’t make enough to afford the regular consultation.
Q: How do things change as an industry grows? I think I’m asking about antitrust or SEC issues. Didn’t Wal*Mart get in trouble a handful of years ago for charging (or paying?) lower rates based on volume? While volume <> income, it is related; I’m asking about the lines and whatnot, not disagreeing with anything posted so far.
You must be misremembering something. Getting volume discounts for buying goods is exactly the way every business in America works. Walmart can get the lower cost per item because it buys more than anybody else. Perfectly legal. Your local independently owned hardware store may bill itself as an Ace Hardware dealer; that’s because it’s entered into a buying agreement with thousands of other independents to get lower prices from wholesalers and manufacturers to be able to come close to competing with the Walmarts.
You as a consumer probably get volume discounts all the time. Anything that is a dollar each or $10 for a dozen is a volume discount.
It is illegal to blackmail or otherwise pressure sellers to get lower rates and Walmart has been accused of using its size to keep competitors from buying goods and changing deals to get more favorable terms. Some of those accusations are probably true. But that’s totally different than the general principle of volume discounts.
This is a bit like what colleges and universities do when they charge high tuition rates but offer lots of financial aid to students who wouldn’t be able to afford the tuition.
Yeah, but that’s income from specific sources–much easier to monitor. The agent knows exactly how much you made since he’s the one who got you the job. And movie costs and earnings are widely known.
BTW, I also know that some churches require you to give them your tax forms in order to be a member, as your dues are 10% of your earnings. I am not a fan.
The nice thing about HUD rents is that lying to them is a serious crime. They can also use government resources to verify what you told them.
I recall a fellow I knew in college - his dad was some rich investment guy… But as a college recent graduate his income tax showed virtually zero. When Toronto built some housing they reserved some units for low income homeowners. He applied. Perfectly legit, but not what the city had in mind with their progressive housing policy ( back about 1980)
So how would you word the contract to prevent ts? Colleges at least can demand parental incomes up to a certain age level. What about the stay at home wife? What if she’s recently divorced? Too many what ifs…